In Tax Fight, Republicans Seeking Fallback Position

Washington Post :
December 4, 2012

WASHINGTON — President Barack Obama on Tuesday rejected a GOP proposal to collect new taxes from high earners by limiting their deductions and tax breaks, insisting that any deal to avert the year-end “fiscal cliff” must include an agreement to raise the top income tax rates.

“We're going to have to see the rates on the top 2 percent go up. And we're not going to be able to get a deal without it,” Obama told Bloomberg Television in his first TV interview since the Nov. 6 election.

Senior Republican aides said the White House offered no additional response to the plan, maintaining a stony silence.

Obama instead appeared to toughen his stance on tax rates, the central dispute between the two parties.

The top tax rate is set to rise automatically from 35 percent to 39.6 percent when the George W. Bush-era tax cuts expire in January.

In a news conference last month, Obama suggested he might let the top rate rise to a level somewhat lower than 39.6 percent to satisfy Republicans who argue that higher rates would hurt small businesses.

But on Tuesday, Obama seemed to block even that path to compromise, sketching out a two-step process that assumes full expiration of the Bush tax cuts in January followed by legislation that could lower the rate sometime next year.

“Let's let tax rates on the upper-income folks go up,” Obama said. “... And then let's set up a process with a time certain, at the end of 2013 or the fall of 2013, where we work on tax reform, we look at what loopholes and deductions both Democrats and Republicans are willing to close. And it's possible that we may be able to lower rates ... at that point.”

Senior Republicans said they were astonished by the White House reaction to their proposal, which represented their first explicit offer to raise revenue.

While the concession came after nearly three decades of strict GOP anti-tax orthodoxy, Democrats dismissed it as too little, too late.

Some conservatives, meanwhile, balked at the proposal drafted by House Speaker John Boehner, R-Ohio, and other senior House leaders.

Sen. Jim DeMint, R-S.C., said “Boehner's ... tax hike will destroy American jobs and allow politicians in Washington to spend even more” without reducing the deficit. The Heritage Foundation said Boehner had “abandoned core conservative principles.”

But those voices were relatively few. Many other conservatives, including a number of Republican freshmen who have frustrated Boehner's efforts to negotiate with Democrats, said they were withholding judgment on the plan.

Taxes will rise automatically on nearly 90 percent of taxpayers next year unless Congress acts.

If Republicans refuse, polls suggest they will take the blame for sending the nation over the fiscal cliff and raising nearly everyone's taxes.

“I've said this for weeks now — the president does not fear the fiscal cliff,” said Rep. Steve King, R-Iowa.